annual report 2010 - bendigo bankannual report kew east financial services limited 5 for year ending...

Kew East Financial Services Limited ABN 91 096 301 058

Kew East Community Bank®Branch

annual report 2010

Annual report Kew East Financial Services Limited 1

Chairman’s report 2-4

Manager’s report 5

Directors’ report 6-10

Financial statements 11-14

Notes to the financial statements 15-30

Directors' declaration 31

Independent audit report 32-33

BSX report 34-36

Contents

Annual report Kew East Financial Services Limited2

For year ending 30 June 2010

The Company has continued to consolidate and grow the banking and community engagement activities

throughout this financial year. The Board is pleased to announce a profit of $155,911 with a total dividend

distribution of 14 cents per share fully franked. Table below outlines shareholder returns.

Financial yearInterim ¢ per

shareInterim

Final ¢ per share

FinalTotal

distribution

2004/2005 2 9,650 3 14,475 24,125

2005/2006 3 14,475 3 (f) 14,475 28,950

2006/2007 5 (f) 24,125 6 (f) 28,950 53,075

2007/2008 6 (f) 28,950 8 (f)

2 (f) special

48,250 77,200

2008/2009 6 (f) 28,950 8 (f) 38,600 67,550

2009/2010 6 (f) 28,950 8 (f) 38,600 67,550

Total Paid to date $ 318,450

(f) Indicates dividend was franked

The special dividend was to recognise the outstanding year we had in 2007/08

Profit before tax and community grants was $484,124. For tax purposes and future community grants, $272,727

was transferred to Community Enterprise Foundation™ (CEF), the philanthropic body established by Bendigo and

Adelaide Bank Ltd to assist the Community Bank® branch network with grants programs.

Developments

Since December, shareholders have been advised, via letter and a shareholder Information Session, as to

the progress and resolution of issues raised at the 2009 Annual General Meeting. Three Directors were

not re-appointed by shareholders at that AGM. Subsequently, the Board have appointed two new Directors,

Ross McDermott and Paula Davey. Their appointment complements our current skill set and strengthens

our community connections. A restructuring of the Board led to the appointment of Ken Franks as Company

Secretary, along with the appointment of Chairs and Standing Committee memberships. Further details regarding

Directors’ roles can be found in the Directors’ report.

Throughout the year Directors have been driving a number of community initiatives by way of:

- Implementing a local business community program supporting business functions and street events in the

Harp Village precinct

- Investigating the viability of a major community project in partnership with the City of Boroondara and the

Boroondara Partnership Forum to provide a Men’s shed facility

- Exploring growth options within Hawthorn and Kew to establish a Community Bank® branch.

Chairman’s report


The Board continues to focus on governance issues and opportunities to grow the business.

During the year there has been an increased need for the Company - through our Marketing Consultant, Manager,

Staff, Chairman and Directors - to be represented and present at functions organised by local community

organisations that we have supported over the years. These developing relationships consolidate and provide

new opportunities to promote and continue the growth of our business.

Community contributions

Receiving sponsorship for three year terms are four local schools, 15 sporting clubs and the Kew Community

Festival.

At the 2009 annual grants presentation evening, twenty community organisations received grants to the value of

$121,630. This included the balance of the pledge for the Kew Courthouse Restoration program. Details of the

recipients were published in the June 2010 Newsletter.

Financial yearCommunity

grants

Community Enterprise

Foundation™Sponsorships Donations Total

2002/2003 6,000# 6,000

2003/2004 0

2004/2005 4,340 4,340

2005/2006 6,400 15,170 21,570

2006/2007 18,500 40,900 7,075 66,475

2007/2008 26,552 50,000 36,750 86,750

2008/2009 59,667 145,000 40,000 185,000

2009/2010 121,630 272,727 17,672 290,399

Total paid to date

232,749 508,627 121,007 6,000 660,534

# Donation by Bendigo and Adelaide Bank Ltd in recognition of growth in the Company’s business in the first two years Community Grants paid in November 2005, 2006 through KEFS account Community Grants paid through the Community Enterprise Foundation™ in November 2007, 2008, 2009 Community Enterprise Foundation™ contributions paid in June 2007, 2008, 2009, 2010

Future

The Board is committed to the feasibility of a new Community Bank® branch at the Kew Junction. At the time of

writing, a lease for a campaign office space opposite Woolworths in Kew has been signed to support the Steering

Committee which has been established. This process is supported by Bendigo and Adelaide Bank Ltd staff.

Directors, staff and the Kew Steering Committee members will be engaged in a developmental program run by

Bendigo and Adelaide Bank Ltd ‘Good for Business - Good for Community’ in early November.

Chairman’s report continued


Acknowledgements

As the recently appointed Chairman I would like to express my sincere thanks to the Directors, our Manager,

George Prodromidis, and bank staff and the Bendigo and Adelaide Bank Ltd regional team for their support and

dedication to the Company over recent months. Similarly, a heart felt thank you to Sue Allen, John McConnell,

Shane Pappas, Brad Miles, and Kate Tassiopoulos for their diligent work throughout their tenure with the

Company as Directors.

The continuing success of this Community Bank® branch has been dependent on the vision and capital support

of the shareholders, the loyalty of our valued customers, the business acumen of Bendigo and Adelaide Bank Ltd

and the willingness to embrace and contribute significantly to our community.

Rod Albury

Chairman

Chairman’s report continued


For year ending 30 June 2010

Our Community Bank® branch has now been in operation for eight financial years. Business growth continues to

meet, and at times exceed, our expectations. The total business now stands at $141 million. This is made up of

$40 million in lending and $101 million in deposits. There are over 4,220 accounts.

We are in a financially sound position, and I would like to acknowledge and thank the community for their

overwhelming support. Our community is to be applauded for the way they continue to support our branch,

making the objectives of the stakeholders a reality.

It is an exciting time as we work towards expanding our business with the potential of a new branch in Kew. It

would seem timely for all of us, whenever and wherever possible, to remind our community of the rewards and

benefits in having a Community Bank® branch within our midst.

I am proud to acknowledge the support and dedication of our Kew East Community Bank® Branch team - Marie,

Elie, Debra, Jenny, and Glenda. Our staff are committed professionals who continue to deliver first class customer

service.

I am looking forward to the challenges and goals which lie ahead. Through the ongoing support of our community

I have no doubt our business will continue to prosper and grow. I thank you all once again for your support and

look forward to working together as we move into a new and exciting chapter of our business.

George Prodromidis

Branch Manager

Manager’s report


For the financial year ended 30 June 2010

Your Directors submit their report of the Company for the financial year ended 30 June 2010.

Directors

The names and details of the Company’s Directors who held office during or since the end of the financial

year are:

Name and position held Qualifications Experience

Sue Allen

Appointed 13 October 2003

Retired 30 November 2009

Chair until 30 November 2009

Dip Bus Studs (Acc); Dip

Fin Planning; CPA (FPS);

CA, CFP®; MAICD

Runs own financial planning

business

John McConnell

Appointed 10 November 2003

Until 30 November 2009

Chair of Audit and Risk

Committee until 30

November 2009

B.Com; Dip Banking;

FAICD; FAIM; F Fin

Former bank executive, Company

Director

Shane Pappas

Appointed 10 November 2003


Chair of Nominations and

Remuneration Committee until

30 November 2009

Dip Eng (Mech); Masters

of Business (Management)

Operations Manager

Eric Thomas

Appointed 17 September 2003

Chair of Community Grants

and Audit and Risk Committee

from 30 November 2009

FCA

Chartered Accountant

Rod Albury

Appointed 18 October 2004

Appointed Chairman on

3 December 2009

T.P.T.C; B Ed; Dip Art;

F.R.M.I.T.

Retired, former school principal,

member of Kew Community

Festival Committee

Allen Borella


Chair of Remuneration

and Nominations Committee’s

from 30 November 2009

A Grade Mechanic

Runs own automotive business

Directors’ report


Name and position held Qualifications Experience

Ken Franks

Appointed 22 March 2001

Company Secretary

from 22 December 2009

Land Surveyor

Property investor, past chair of

Harp Village Business Association

Mark Heffernan

Appointed 7 July 2008

Treasurer from 7 July 2008

CPA

Runs own financial services

business. Former credit union

Treasurer

Brad Miles


Resigned 30 November 2009

B.Sc.(Hons); MEIANZ

Accountable Officer of a statutory

body. Current and past office

bearer of a number of local

community organisations

Kate Tassiopoulos

Appointed 6 June 2009


B.Ec

Recruitment and succession

planning within the finance sector

Ross McDermott

Appointed 10 March 2009

B Com CA

Chartered Accountant, Tax Agent,

Company Liquidator

Paula Davey

Appointed 28 April 2010

Former local councillor, extensive

connections with community

organisations, consultant and

facilitator

Other than shown below no Director has material interests in contracts or proposed contracts with the Company.

Principal activities

The principal activities of the Company during the course of the financial year were in providing Community

Bank® services under management rights to operate a franchised branch of Bendigo and Adelaide Bank Ltd.

There has been no significant changes in the nature of these activities during the year.

Operating results

Operations have continued to perform in line with expectations. The profit after income tax expense for the

Company for the financial year was $155,911 (2009: $104,512).

Directors’ report continued



Year ended 30 June 2010Dividends Cents per share $’000

Final dividends proposed: 8 38,600

Dividends paid in the year:

- Interim for the year 6 28,951

- As recommended in the prior year report 8 38,600

Significant changes in the state of affairs

In the opinion of the Directors there were no significant changes in the state of affairs of the Company that

occurred during the financial year under review not otherwise disclosed in this report.

Significant events after the balance date

There are no matters or circumstances that have arisen since the end of the financial year that have significantly

affected or may significantly affect the operations of the Company, the results of those operations or the state of

affairs of the Company, in future years.

Likely developments

The Company will continue its policy of providing banking services to the community. The Company is considering

a new facility in the Kew Junction precinct.

Indemnification and insurance of Directors and Officers

The Company has agreed to indemnify each Officer (Director, Secretary or employee) out of assets of the

Company to the relevant extent against any liability incurred by that person arising out of the discharge of their

duties, except where the liability arises out of conduct involving dishonesty, negligence, breach of duty or the lack

of good faith. The Company also has Officers Insurance for the benefit of Officers of the Company against any

liability occurred by the Officer, which includes the Officer’s liability for legal costs, in or arising out of the conduct

of the business of the Company or in or arising out of the discharge of the Officer’s duties.

Disclosure of the nature of the liability and the amount of the premium is prohibited by the confidentiality clause

of the contract of insurance. The Company has not provided any insurance for an Auditor of the Company or a

related body corporate.

Directors’ benefits

Mark A Heffernan, a current Director of the Company, is a principal of Heffernan Crawford Partners Pty Ltd,

Certified Practising Accountants. An employee of Heffernan Crawford Partners Pty Ltd, Mr Leon Caulfield acted as

Secretary of the Company from 3 February to 22 December 2009 and Heffernan Crawford Partners Pty Ltd was

paid $21,044 for this service for the financial year ended 30 June 2010 (2009 $13,877).

Since 30 June 2010, Paula Davey, a Director of the Company has been contracted by the Company to provide

administrative services to the Board.


Directors’ benefits (continued)

Other than stated above no Director has received or become entitled to receive, during or since the financial year,

a benefit because of a contract made by the Company, controlled entity or related body corporate with a Director,

a firm which a Director is a member or an entity in which a Director has a substantial financial interest. This

statement excludes a benefit included in the aggregate amount of emoluments received or due and receivable by

Directors shown in the Company’s accounts, or the fixed salary of a full-time employee of the Company, controlled

entity or related body corporate.

Executive remuneration

The Branch Manager was paid within the range of $100,00.00 - $150,000.00 for the financial year. (2009

$100,000 - $150,000)

Directors’ meetings

The number of Directors’ meetings held and attended:

Director Board Remuneration NominationsCommunity

grantsAudit &

risk

Sue Allen 4 (5) N/A N/A N/A 1 (1)

John McConnell 4 (5) N/A 2 (2) N/A 1 (1)

Shane Pappas 4 (5) 2 (2) 2 (2) N/A N/A

Eric Thomas 12 (13) N/A N/A 3 (3) 5 (5)

Rod Albury 13 (13) 3 (3) 4 (4) 2 (3) 2 (4)

Allen Borella 12 (13) 5 (5) 4 (4) N/A N/A

Ken Franks 13 (13) N/A 4 (4) N/A N/A

Mark Heffernan 11 (13) N/A N/A N/A 5 (5)

Brad Miles 4 (5) N/A N/A 2 (2) N/A

Kate Tassiopoulos 5 (5) N/A N/A N/A N/A

Ross McDermott 5 (5) N/A N/A N/A 2 (2)

Paula Davey 5 (5) N/A N/A 1 (1) N/A

# The first number is the meetings attended while in brackets is the number of meetings eligible to attend.

N/A - not a member of that Committee.

Company Secretary

Ken Franks has been the Company Secretary of Kew East Financial Services Ltd since 22 December 2009. Refer

above for Ken’s qualifications and experience.




Corporate Governance

The Company has implemented various corporate governance practices, which include:

(a) The establishment of an audit & risk committee. Members of the audit & risk committee are Eric Thomas,

Mark Heffernan and Ross McDermott.

(b) Director approval of operating budgets and monitoring of progress against these budgets;

(c) Ongoing Director training; and

(d) Monthly Director meetings to discuss performance and strategic plans.

Auditor Independence Declaration

The Directors received the following declaration from the Auditor of the Company:

Signed in accordance with a resolution of the Board of Directors at Kew East on 19 September 2010.

Rod Albury

Chairman

Richmond Sinnott & DelahuntyChartered Accountants

172 McIvor RoadPO Box 30

Bendigo. 3552Ph. 03 5443 1177Fax. 03 5444 4344

E-mail: [email protected]

Partners:Kenneth J RichmondWarren J SinnottPhilip P DelahuntyBrett A Andrews


The accompanying notes form part of these financial statements.

Financial statements

Statement of comprehensive income For the year ended 30 June 2010

Note 2010 2009 $ $

Revenue from ordinary activities 2 1,165,614 993,601

Employee benefits expense 3 (353,992) (363,611)

Charitable donations and sponsorship (290,399) (184,944)

Depreciation and amortisation expense 3 (25,874) (35,972)

Other expenses from ordinary activities 3 (283,952) (259,771)

Profit before income tax expense 211,397 149,303

Income tax expense 4 55,486 44,791

Profit after income tax expense 155,911 104,512

Other comprehensive income - -

Total comprehensive income 155,911 104,512

Earnings per share (cents per share)

- basic for profit for the year 22 32.31 21.66

- diluted for profit for the year 22 32.31 21.66



Statement of financial position As at 30 June 2010

Note 2010 2009 $ $

Current assets

Cash and cash equivalents 6 669,263 610,322

Current tax refundable 4 - 24,669

Receivables 7 119,096 93,940

Investments 8 11,416 10,073

Total current assets 799,775 739,004

Non-current assets

Property, plant and equipment 9 92,367 90,443

Deferred tax assets 4 24,210 26,151

Intangible assets 10 14,167 24,167

Total non-current assets 130,744 140,761

Total assets 930,519 879,765

Current liabilities

Current tax payable 4 4,751 -

Payables 11 32,636 70,349

Provisions 12 68,556 70,888

Total current liabilities 105,943 141,237

Non-current liabilities

Deferred tax liability 4 4,250 7,250

Provisions 12 3,657 2,969

Total non-current liabilities 7,907 10,219

Total liabilities 113,850 151,456

Net assets 816,669 728,309

Equity

Share capital 13 482,510 482,510

Retained earnings 14 334,159 245,799

Total equity 816,669 728,309

Financial statements continued



Statement of cash flows For the year ended 30 June 2010

Note 2010 2009 $ $

Cash flows from operating activities

Cash receipts in the course of operations 1,226,184 961,088

Cash payments in the course of operations (1,081,236) (909,632)

Interest paid (8) -

Interest received 26,475 37,038

Income tax paid (27,125) -

Net cash flows from/(used in) operating activities 15b 144,290 88,494

Cash flows from investing activities

Payments for property, plant and equipment (17,798) (5,493)

Net cash flows from/(used in) investing activities (17,798) (5,493)

Cash flows from financing activities

Dividends paid (67,551) (77,201)

Net cash flows from/(used in) financing activities (67,551) (77,201)

Net increase/(decrease) in cash held 58,941 5,800

Cash and cash equivalents at start of year 610,322 604,522

Cash and cash equivalents at end of year 15a 669,263 610,322




Statement of changes in equity For the year ended June 2010

Note 2010 2009 $ $

Share capital

Balance at start of year 482,510 482,510

Issue of share capital - -

Share issue costs - -

Balance at end of year 482,510 482,510

Retained earnings

Balance at start of year 245,799 218,488


Dividends paid 21 (67,551) (77,201)

Balance at end of year 334,159 245,799



For year ended 30 June 2010

Note 1. Basis of preparation of the financial report

(a) Basis of preparation

Kew East Financial Services Limited (‘the Company’) is domiciled in Australia. The financial statements for the

year ending 30 June 2010 are presented in Australian dollars. The Company was incorporated in Australia and

the principal operations involve providing Community Bank® services.

The financial statements have been prepared on an accruals basis and are based on historical costs and do not

take into account changing money values or, except where stated, current valuations of non-current assets.

The financial statements require judgements, estimates and assumptions to be made that affect the application

of accounting policies. Actual results may differ from these estimates.

The financial statements were authorised for issue by the Directors on 19 September 2010.

(b) Statement of compliance

The financial report is a general purpose financial report, which has been prepared in accordance with Australian

Accounting Standards (including Australian Interpretations) adopted by the Australian Accounting Standards

Board and the Corporations Act 2001. The financial report of the Company complies with International Financial

Reporting Standards and interpretations adopted by the International Accounting Standards Board. Australian

Accounting Standards that have been recently issued or amended, but are not yet effective, have not been

adopted in the preparation of this financial report.

(c) Significant accounting policies

The following is a summary of the material accounting policies adopted. The accounting policies have been

consistently applied and are consistent with those applied in the 30 June 2009 financial statements.

Income tax

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax

assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which

the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be

utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent

that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred

income tax asset to be utilised.

Notes to the financial statements


Notes to the financial statements continued

Note 1. Basis of preparation of the financial report (continued)

Income tax (continued)

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year

when the asset is realised or the liability is settled.

Property, plant and equipment

Property, plant and equipment are brought to account at cost less accumulated depreciation and any impairment

in value.

Land and buildings are measured at fair value less accumulated depreciation.

Depreciation is calculated on a straight line basis over the estimated useful life of the asset using rates ranging

from 5 to 33%.

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in

circumstances indicate the carrying value may not be recoverable.

If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the assets

or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset.

Investments

Following initial recognition at cost, investments are recorded at fair value at reporting date if the fair value is

below cost. Impairment in recognised as an expense.

Fair value is determined by reference to market based evidence, which is the amount for which the assets could

be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length

transaction as at the valuation date.

Recoverable amount of assets

At each reporting date, the Company assesses whether there is any indication that an asset is impaired. Where

an indicator of impairment exists, the Company makes a formal estimate of the recoverable amount. Where the

carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down

to its recoverable amount.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where

the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is

recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included.




Goods and services tax (continued)

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables

or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a

gross basis.

The GST components of cash flows arising from investing and financing activities which are recoverable from, or

payable to, the ATO are classified as operating cash flows.

Employee benefits

The provision for employee benefits to wages, salaries and annual leave represents the amount which the

Company has a present obligation to pay resulting from employees’ services provided up to the reporting date.

The provision has been calculated on undiscounted amounts based on wage and salary rates expected to be paid

and includes related on-costs.

The Company contributes to a defined contribution plan. Contributions to employee superannuation funds are

charged against income as incurred.

Intangibles

Establishment costs have been initially recorded at cost and amortised on a straight line basis at a rate of 20%

per annum.

Cash

Cash on hand and in banks are stated at nominal value.

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in

money market instruments, net of outstanding bank overdrafts.

Comparative figures

Where required by Accounting Standards comparative figures have been adjusted to conform with changes in

presentation for the current financial year.

Revenue

Interest and fee revenue is recognised when earned. All revenue is stated net of the amount of goods and

services tax (GST).

Receivables and payables

Receivables and payables are non interest bearing and generally have payment terms of between 30 and 90

days. Receivables are recognised and carried at original invoice amount less a provision for any uncollected

debts. Liabilities for trade creditors and other amounts are carried at cost that is the fair value of the

consideration to be paid in the future for goods and services received, whether or not billed to the Company.




Loans and borrowings

All loans are measured at the principal amount. Interest is recognised as an expense as it accrues.

Provisions

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a

future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is

probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the

amount of the obligation.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly

recommended on or before the reporting date.

Share capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any

transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the

share proceeds received.

2010 2009 $ $

Note 2. Revenue from ordinary activitiesOperating activities

- services commissions 1,135,442 958,046

Total revenue from operating activities 1,135,442 958,046

Non-operating activities:

- interest received 28,829 35,052

- other revenue 1,343 503

Total revenue from non-operating activities 30,172 35,555

Total revenue from ordinary activities 1,165,614 993,601



2010 2009 $ $

Note 3. ExpensesEmployee benefits expense

- wages and salaries 295,625 299,095

- superannuation costs 29,522 27,924

- workers’ compensation costs 1,056 936

- other costs 27,789 35,656

353,992 363,611

Depreciation of non-current assets:

- plant and equipment 4,973 15,657

- fixtures and fittings 7,072 6,593

- office furniture and equipment 3,829 3,722

Amortisation of non-current assets:

- intangibles 10,000 10,000

25,874 35,972

Other expenses:

- Accounting fees 56,026 45,264

- IT costs 27,530 29,356

- Marketing 53,939 46,019

- Occupancy costs 57,301 56,945

- Insurance 10,947 17,061

- Other expenses 78,209 65,126

283,952 259,771

Finance costs:

- Interest paid 8 -

Bad debts 49 71



2010 2009 $ $

Note 4. Income tax expenseThe prima facie tax on profit before income tax is reconciled to the

income tax expense as follows:

Prima facie tax on profit before income tax at 30% 63,419 44,791

Add / (less) tax effect of:

- Non-deductible / (other deductible) expenses (7,933) -

Current income tax expense 55,486 44,791

Income tax expense 55,486 44,791

Tax liabilities

Current tax payable / (refundable) 4,751 (24,669)

Deferred tax liability 4,250 7,250

Deferred tax assets

Future income tax benefits arising from tax losses are recognised

at reporting date as realisation of the benefit is regarded

as probable. 24,210 26,151

Note 5. Auditors’ remunerationAmounts received or due and receivable by Richmond, Sinnott & Delahunty for:

- Audit or review of the financial report of the Company 2,900 -

- Share registry services 2,168 3,036

5,068 3,036

Note 6. Cash and cash equivalentsCash at bank and on hand 669,263 610,322

Note 7. ReceivablesTrade debtors 105,109 88,346

Other debtors 13,987 5,594

119,096 93,940



2010 2009 $ $

Note 8. InvestmentsUnits in managed funds - at cost 15,000 15,000

Less impairment in value (3,584) (4,927)

11,416 10,073

Note 9. Property, plant and equipmentPlant and equipment

At cost 139,720 139,720

Less accumulated depreciation (139,720) (134,747)

- 4,973

Office furniture & equipment

At cost 35,910 34,214


10,363 12,495

Fixtures & fittings

At cost 127,841 111,739


82,004 72,975

Total written down amount 92,367 90,443

Movements in carrying amounts

Plant and equipment

Carrying amount at beginning of year 4,973 17,111

Additions - 3,519

Disposals - -

Depreciation expense (4,973) (15,657)

Carrying amount at end of year - 4,973



2010 2009 $ $

Note 9. Property, plant and equipment (continued)

Office furniture & equipment


Additions 1,697 1,974

Disposals - -


Carrying amount at end of year 10,363 12,495

Fixtures & fittings


Additions 16,101 -

Disposals - -


Carrying amount at end of year 82,004 72,975

Note 10. Intangible assetsFranchise fee

At cost 50,000 50,000

Less accumulated amortisation (35,833) (25,833)

14,167 24,167

Note 11. PayablesTrade creditors 32,636 70,349

32,636 70,349

Note 12. ProvisionsCurrent

Employee benefits 68,556 70,888

Non-current

Employee benefits 3,657 2,969



2010 2009 $ $

Note 13. Share capital482,510 Ordinary shares fully paid of $1 each 482,510 482,510

Note 14. Retained earnings/(accumulated losses)Balance at the beginning of the financial year 245,799 218,488

Profit/(loss) after income tax 155,911 104,512

Dividends (67,551) (77,201)

Balance at the end of the financial year 334,159 245,799

Note 15. Statement of cash flows(a) Cash and cash equivalents

Cash assets 669,263 610,322

669,263 610,322

(b) Reconciliation of profit after tax to net cash provided

from/(used in) operating activities

Profit after income tax 155,911 104,512

Non cash items

- Depreciation 15,874 25,972

- Amortisation 10,000 10,000

- Impairment / (gain in value) of investment (1,343) 827

Changes in assets and liabilities

- (Increase) decrease in receivables (25,156) 484

- (Increase) decrease in current tax refundable 24,669 -

- (Increase) decrease in deferred tax asset 1,941 -

- Increase (decrease) in current tax payable 4,751 -

- Increase (decrease) in deferred tax payable (3,000) -

- Increase (decrease) in payables (37,713) 7,079

- Increase (decrease) in provisions (1,644) (60,380)

Net cash flows from/(used in) operating activities 144,290 88,494



Note 16. Director and related party disclosuresThe names of Directors who have held office during the financial year are:

Sue Allen

John McConnell

Shane Pappas

Eric Thomas

Rod Albury

Allen Borella

Ken Franks

Mark Heffernan

Brad Miles

Kate Tassiopoulos

Ross McDermott

Paula Davey

Mark A Heffernan a current Director of the Company, is a principal of Heffernan Crawford Partners Pty Ltd,

Certified Practising Accountant. An employee of Heffernan Crawford Partners Pty Ltd, Mr Leon Caulfield acted as

Secretary of the Company from 3 February to 22 December 2009 and Heffernan Crawford Partners Pty Ltd was

paid $21,044 for this services for the financial year ended 30 June 2010 (2009 $13,877).

Since 30 June 2010, Paula Davey, a Director of the Company has been contracted by the Company to provide

administrative services to the Board.

Other than stated above no Director or related entity has entered into a material contract with the Company. No

Directors’ fees have been paid as the positions are held on a voluntary basis.

Directors’ shareholdings 2010 2009

Sue Allen 6,000 6,000

John McConnell - -

Shane Pappas 10,000 10,000

Eric Thomas 1,001 1,001

Rod Albury - -

Allen Borella 501 501

Ken Franks 3,901 5,001

Mark Heffernan - -

Brad Miles 500 500

Kate Tassiopoulos - -

Ross McDermott 1,000 1,000

Paula Davey - -



Note 16. Director and related party disclosures (continued)

Other than the sale of 1,100 shares by Ken Franks there was no change in Director shareholdings during the year.

Shares are held directly or via related entities and each share held has a paid up value of $1 and is fully paid.

Note 17. Subsequent eventsThere have been no events after the end of the financial year that would materially affect the financial

statements.

Note 18. Contingent liabilitiesThere were no contingent liabilities at the date of this report to affect the financial statements.

Note 19. Segment reportingThe economic entity operates in the financial services sector were it provides banking services to its clients. The

economic entity operates in one geographic area being Kew East, Victoria.

Note 20. Corporate informationKew East Financial Services Limited is a Company limited by shares incorporated in Australia whose shares are

publicly traded on the Bendigo Stock Exchange.

The registered office and principal place of business is: 661A High Street,

Kew East VIC 3102

2010 2009 $ $

Note 21. Dividends paid or provided for on ordinary shares(a) Dividends paid during the year

(i) Current year interim

Franked dividends - 6 cents per share (2009: 6 cents

per share) 28,951 28,951

(ii) Previous year final


per share) 38,600 48,250



2010 2009 $ $

Note 21. Dividends paid or provided for on ordinary shares (continued)

(b) Dividends proposed and not recognised as a liability


per share) 38,600 38,600

(c) Franking credit balance

The amount of franking credits available for the subsequent

financial year are:

- Franking account balance as at the end of the financial year 209,529 206,863

- Franking credits / (debits) that will arise from the payment / (refund)

of income tax payable as at the end of the financial year 4,751 (24,669)

214,280 182,194

The tax rate at which dividends have been franked is 30% (2009: 30%).

Dividends proposed will be franked at a rate of 30% (2009: 30%).

Note 22. Earnings per shareBasic earnings per share amounts are calculated by dividing profit after

income tax by the weighted average number of ordinary shares

outstanding during the year.

Diluted earnings per share amounts are calculated by dividing profit

after income tax by the weighted average number of ordinary shares

outstanding during the year (adjusted for the effects of any dilutive

options or preference shares).

The following reflects the income and share data used in the basic and

diluted earnings per share computations:


Weighted average number of ordinary shares for basic and diluted

earnings per share 482,510 482,510



Note 23. Financial risk managementThe Company has exposure to credit risk, liquidity risk and market risk from their use of financial instruments.

This note presents information about the Company’s exposure to each of the above risks, their objectives, policies

and processes for measuring and managing risk, and the management of capital.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management

framework. The Board has established an Audit and Risk Committee which reports regularly to the Board. The

Audit and Risk Committee is assisted in the area of risk management by an internal audit function.

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails

to meet its contractual obligations. For the Company it arises from receivables and cash assets.

The maximum exposure to credit risk at reporting date to recognised financial assets is the carrying amount

of those assets as disclosed in the Statement of Financial Position and notes to the financial statements. The

Company’s maximum exposure to credit risk at reporting date was:

Carrying amount 2010 2009 $ $

Cash assets 669,263 610,322

Investments 11,416 10,073

Receivables 119,096 93,940

799,775 714,335

The Company’s exposure to credit risk is limited to Australia by geographic area. The majority of receivables are

due from Bendigo and Adelaide Bank Ltd.

None of the assets of the Company are past due (2009: nil past due) and based on historic default rates, the

Company believes that no impairment allowance is necessary in respect of assets not past due.

The Company limits its exposure to credit risk by only investing in liquid securities with Bendigo and Adelaide

Bank Ltd.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The

Company ensures it will have enough liquidity to meet its liabilities when due under both normal and stressed

conditions. Liquidity management is carried out within the guidelines set by the Board.

Typically, the Company maintains sufficient cash on hand to meet expected operational expenses, including

the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot

reasonably be predicted, such as natural disasters.



Note 23. Financial risk management (continued)

(b) Liquidity risk (continued)

The following are the estimated contractual maturities of financial liabilities, including estimated interest

payments.

Carryingamount

$

Contractualcash flows

$

1 year or less

$

Over 1 to5 years

$

More than5 years

$

30 June 2010

Payables 32,636 (32,636) (32,636) – –

32,636 (32,636) (32,636) – –

30 June 2009

Payables 70,349 (70,349) (70,349) – –

70,349 (70,349) (70,349) – –

(c) Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the Company’s income

or the value of its holdings of financial instruments. The objective of market risk management is to manage and

control market risk exposures within acceptable parameters.

Interest rate risk

Interest rate risk is that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. The Company reviews the exposure to interest rate risk as part of the regular

Board meetings.

Sensitivity analysis

At the reporting date the interest rate profile of the Company’s interest bearing financial instruments was:


Fixed rate instruments

Financial assets 224,421 116,631

Financial liabilities - -

224,421 116,631




(c) Market risk (continued)

Sensitivity analysis (continued)


Variable rate instruments

Financial assets 444,842 493,691

Financial liabilities - -

444,842 493,691

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed interest rate financial assets or liabilities at fair value through profit

or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have no impact on profit or retained

earnings. For the analysis performed on the same basis as at 30 June 2009 there was also no impact. As at both

dates this assumes all other variables remain constant.

(d) Net fair values

The net fair values of financial assets and liabilities approximate the carrying values as disclosed in the Statement

of Financial Position. The Company does not have any unrecognised financial instruments at year end.

(e) Capital management

The Board’s policy is to maintain a strong capital base so as to sustain future development of the Company. The

Board of Directors monitor the return on capital and the level of dividends to shareholders. Capital is represented

by total equity as recorded in the Statement of Financial Position.

In accordance with the franchise agreement, in any 12 month period, the funds distributed to shareholders shall

not exceed the Distribution Limit.

(i) the Distribution Limit is the greater of:

(a) 20% of the profit or funds of the Franchisee otherwise available for distribution to shareholders in that

12 month period; and

(b) subject to the availability of distributable profits, the Relevant Rate of Return multiplied by the average level of

share capital of the Franchisee over that 12 month period; and

(ii) the Relevant Rate of Return is equal to the weighted average interest rate on 90 day bank bills over that

12 month period plus 5%.




(e) Capital management (continued)

The Board is managing the growth of the business in line with this requirement. There are no other externally

imposed capital requirements, although the nature of the Company is such that amounts will be paid in the form

of charitable donations and sponsorship. Charitable donations and sponsorship paid for the year ended 30 June

2010 can be seen in the Statement of Comprehensive Income.

There were no changes in the Company’s approach to capital management during the year.


Directors’ declaration In accordance with a resolution of the Directors of Kew East Financial Services Limited, I state that:

In the opinion of the Directors:

(a) the financial statements and notes of the Company are in accordance with the Corporations Act 2001,

including:

(i) giving a true and fair view of the Company’s financial position as at 30 June 2010 and of their

performance for the year ended on that date; and

(ii) complying with Accounting Standards in Australia and Corporations Regulations 2001;

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable; and

(c) this declaration has been made after receiving the declarations required to be made to the Directors in

accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2010.

Eric Thomas

Director

Signed at Kew East on 19 September 2010.


Independent audit report

Richmond Sinnott & DelahuntyChartered Accountants

172 McIvor RoadPO Box 30

Bendigo. 3552Ph. 03 5443 1177Fax. 03 5444 4344

E-mail: [email protected]

Partners:Kenneth J RichmondWarren J SinnottPhilip P DelahuntyBrett A Andrews


Independent audit report continued


BSX report

Share information

In accordance with Bendigo Stock Exchange listing rules the Company provides the following information as at

17 September 2010, which is within 6 weeks of this report being sent to shareholders.

The following table shows the number of shareholders, broken into various categories showing the total number

of shares held.

Number of shares held Number of shareholders

1 to 1,000 165

1,001 to 5,000 88

5,001 to 10,000 9

10,001 to 100,000 0

100,001 and over 0

Total shareholders 262

Each of the above shareholders are entitled to 1 vote, irrespective of the number of shares held.

There are no substantial shareholders (holding more than 5% of voting rights) as each shareholder is entitled to 1

vote. Normally holding more than 5% of total issued shares would create a substantial shareholder, but this is not

applicable due to the voting restrictions for the Company.

There are 8 shareholders holding less than a marketable parcel of shares ($500 in value).

There are no restricted securities on issue.

All shares on issue are ordinary shares fully paid to $1 per share. There are no unquoted equity securities.

The following table shows the 10 largest shareholders.

Number of Percentage Shareholder shares of capital

Adrian Lawler & Karen Lawler 15,000 3.11%

Bruce Diggles 10,000 2.07%

Estate Of James Michael Hall 10,000 2.07%

Fiona Margaet Cochrane as trustee for <ac381638> 10,000 2.07%

Ivory Home Pty Ltd As Trustee For <The Searle Executive

Superannuation Fund A/c> 10,000 2.07%

James Raymond Smith As Trustee For (Avenel Super Fund No. 3> 10,000 2.07%

Marjorie Irene White 10,000 2.07%


BSX report continued The following table shows the 10 largest shareholders (continued)

Number of Percentage Shareholder shares of capital

Phillip R Gibbs & Margaret A Gibbs As Trustee For

<P& M Gibbs S/F A/C> 10,000 2.07%

Susan Diggles 10,000 2.07%

Longbourne Pty Ltd 9000 1.87%

104,000 21.55%

Registered office and principal administrative office

The registered office of the Company is located at:

661A High Street,

Kew East VIC 3102

Phone: (03) 9859 6799

The principal administrative office of the Company is located at:

661A High Street,

Kew East VIC 3102

Phone: (03) 9859 6799

Security register

The security register (share register) is kept at:

Richmond Sinnott & Delahunty

172-176 Mclvor Road,

Bendigo VIC 3550

Phone: (03) 5443 1177

Company Secretary

Ken Franks has been the Company Secretary of Kew East Community Financial Services Ltd since

22 December 2009.

Ken Franks qualifications and experience include land surveying, property investing and he was the past chair of

Harp Village Business Association.


BSX report continued

Corporate Governance

The Company has implemented various corporate governance practices, which include:

(a) The establishment of an audit committee. Members of the audit committee are Eric Thomas, Mark Heffernan

and Ross McDermott

(b) Director approval of operating budgets and monitoring of progress against these budgets;

(c) Ongoing Director training; and

(d) Monthly Director meetings to discuss performance and strategic plans.

Annexure 3A

There are no material differences between the information in the Company’s Annexure 3A and the information in

the financial documents in its annual report.

Kew East Community Bank® Branch 661A High Street, Kew East VIC 3102Phone: (03) 9859 7699

Franchisee: Kew East Financial Services Limited 661A High Street, Kew East VIC 3102Phone: (03) 9871 7836 ABN: 91 096 301 058

www.bendigobank.com.au/kew_east Bendigo and Adelaide Bank Limited, The Bendigo Centre, Bendigo VIC 3550 ABN 11 068 049 178. AFSL 237879. (BMPAR10078) (09/10)

annual report 2010 - bendigo bankannual report kew east financial services limited 5 for year ending...

Documents